Calculating a Return on Digital Assets

By Rebecca Wettemann  |  Posted 2003-02-01 Email Print this article Print
 
 
 
 
 
 
 

Use this calculator to determine the returns on your Digital Asset Management deployment.

In early 2000, AOL Time Warner Book Group Chief Executive Larry Kirshbaum had a gut feeling the company would need a digital asset management system if it was going to cash in on an e-book market expected to hit $2.3 billion in sales by 2005.

But the days of Internet hype and free technology spending are long gone. And with the cost of such an enterprisewide system pegged at $3 million to $5 million, most companies must quantify their expected returns before investing in any type of a digital archive system.

Nucleus Research identified a number of ways companies considering reusable media projects can calculate potential returns.

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Return on administrative costs.

Direct savings are the first returns most companies can quantify. Companies should look at the following areas to identify direct benefits:

Reduced overnight, courier and mail charges.
There's a return from eliminating the costs of couriers, Federal Express and plain old mail.
FORMULA:
# of
documents
X
Mailing cost/
document
=
Return
 
Reduced administrative costs.
Count the number of deliveries multiplied by the time required to manage each one.
FORMULA:
# of
documents
sent
X
5 to 20
minutes per
document
=
Saved hours

Managers should then discount the apparent time saved by a correction factor. The factor allows for the percentage of the saved time that gets spent in non-job-related activities—such as goofing off.

FORMULA:
Hours
saved
X
Correction
factor
X
Fully loaded
hourly cost
of employee
=
Return
(NOTE: Discount hours saved by between 30% and 50%, depending on the individual's motivation, supervision and compensation structure.)
 
Reduced storage costs.
With digitizing assets, there are also savings that come from reduced disk and storage space. Calculate reduced file storage space in savings per square foot; reduced disk purchases by the carton or by terabyte.

Return on upselling.

Companies may drive new revenue over the long term. Some potential returns:
 
Increased profit on new revenue streams.
FORMULA:
Expected
# of new
products
X
Revenue
per product
X
Profit
margin
=
Return
 
Increased profits from retailer relationships.
If a publisher, for instance, can show its outlets how to cut advertising costs with digital content, it can demand a cut of savings.
FORMULA:
# of
retailers
X
Contract
volume
X
Expected
margin
increase
X
Profit
margin
=
Return

—Rebecca Wetteman is the Vice President of Research for Nucleus Research, an independent global research and advisory firm that provides financial and technology expertise.
You can write to her at rwettemann@nucleusresearch.com



 
 
 
 
 
 
 
 
 
 

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